You are currently viewing Spanish Flu Impact on the Stock Market in the USA and Response Measures by the Government

Spanish Flu Impact on the Stock Market in the USA and Response Measures by the Government

The Spanish flu, also known as the 1918 flu pandemic, was an unusually deadly influenza pandemic caused by the H1N1 influenza A virus. Lasting from February 1918 to April 1920, it infected 500 million people – about a third of the world’s population at the time – in four successive waves. The death toll is typically estimated to have been somewhere between 17 million and 50 million, and possibly as high as 100 million, making it one of the deadliest pandemics in human history.


  1. The restrictions likely to impact economic activity directly were essentially closings of places of gatherings mandated by local authorities. The list varied somewhat, but almost always included theatres, movie theatres, bowling alleys, dance halls, and places of amusement in general. Saloons were not always included, and restaurants are rarely mentioned. Retail stores were not closed, although some cities like New York instituted staggered business hours to lessen crowding in public transportation. Outside of entertainment and saloons, businesses were not closed, nor were any restrictions placed on the movement of people or the sizes of gatherings.
  2. Four Liberty Loans and one Victory Loan were issued from 1917 to 1919 at rates set by Congress, rising from 3.5% to 4.75%. The Third Liberty Loan, at 4.5%, had concluded in May 1918, and the Fourth was floated at 4.25% in the midst of the epidemic, in September 1918.
  3. The more restrictive methods of infection control issued by public health departments were quarantines and the isolation of the ill. These measures required a sacrifice of individual liberty for the societal good and therefore required a strong public health authority. Both the Illinois and New York State Health Departments ordered that patients must be quarantined until all clinical manifestations of the illness subsided. Because of the strain on facilities, only severe cases were to be hospitalized while mild influenza patients were to remain at home. The APHA also supported institutional quarantines to protect people from the outside world in establishments like asylums and colleges. The use of institutional quarantines was applied to the many military training camps set up in the United States to prepare soldiers for war. These camps, with masses of men from throughout the country, were prime targets of huge influenza epidemics. The men were kept in strict isolation once ill and entire camps was often quarantined. They wanted to initiate education programs and publicity on respiratory hygiene about the dangers of coughing, sneezing and the careless disposal of nasal discharges. They aimed to teach people the value of hand-washing before eating and the advantages of general hygiene Public Health Departments issued Flu Posters to educate the community and reduce the spread of infection. The members also noted that the response should vary according to the type of community and the living conditions. Measures were to be adapted to rural or metropolitan areas, with a centralized coordination to enforce compulsory reporting and canvassing for cases.

On President Wilson’s response to the influenza

“He never released any statement about influenza whatsoever. The federal government did next to nothing.

John Barry

Of course, we had a different society then. But everything was up to local leadership. And that’s one reason why we got such varied responses. A lot of it is also just random luck. In some places, the virus seemed more lethal than others. The earlier cities that were hit were hit much harder. And the virus seemed to attenuate a little bit over time. So if got hit later, you were in better shape. And if you got sick in the same city later in the epidemic, you were in better shape. It wasn’t because medical care improved, medical care deteriorated. At first, it was nothing they could do anyway except supportive care. And second, by later in the outbreak, particularly in the same city, medical care was totally exhausted and overwhelmed. So the virus was the chief determinant of what was going on.

Parallels between the 1918 Influenza and COVID-19

  • The vast majority of disease victims recovered quickly and fully.
  • Those spreading the disease were often asymptomatic.
  • The disease struck in a rising power (the U.S. in 1918; China today).
  • Governments were slow to respond to the disease spread.
  • The news media underreported the diseases in their early stages.
  • Scientific, evidence-based information competed with speculation, rumor and innuendo.
  • Quarantines increased isolation and kept loved ones away from patients.
  • Government leaders seeking to allay fears understated the disease threat.
  • Government inaccuracies, lies and mismanagement diminished public trust.
  • Lack of intergovernmental coordination created confusion.
  • Governmental focus on non-disease issues (war, the economy) impeded responsiveness.
  • State and local governments pursued disease management with varying effectiveness.
  • Healthcare workers, often heroic, disproportionately contracted the disease.
  • Citizens often blamed others (the Germans, Chinese) for the disease spread.
  • Exploiting the public’s fear, widespread scams emerged.
  • Officials and doctors pursued immediately available but unproven cures.
  • Governments and industry undertook massive efforts to create vaccines and cures.


Opening price76.6882.60107.23
Closing price82.20107.2371.95
Annual % return10.5130.45-32.90

As visible in the table above, the stock market did not react extremely to the Spanish Flu pandemic over 1918-1920. Ironically, it showed a great rally of 30%!  Only in the year 1920, a big crash of over 30% took place and the World War scenario is a major factor for the crash.

According to economist Bryan Taylor:

“However, the impact of the Spanish Flu on the stock market was minimal. If you look at the Dow Jones Industrial Average in 1918 and 1919, you can see that the stock market was relatively unaffected by any of the three waves of the Spanish flu. Of course, the Spanish flu occurred in 1918 while World War I was raging in Europe so the war had a larger impact on the stock market than the flu. There were few if any global supply chains that the Spanish Flu could disrupt because the war made supply chains non existent. The second and worst wave of flu occurred at the end of World War I when peace was finally achieved after four years of devastating destruction. It is interesting that there was little impact on the stock market of World War I ending on November 11, 1918. Perhaps euphoria about the conclusion of the war was offset by concerns about the Spanish flu.

It is comforting to see that when the final wave of the Spanish flu subsided in February 1919, the market began an increase of 50% which lasted until November of 1919. Whether this increase occurred because of the end of World War I or the end of the flu or both is impossible to say, but it does provide encouragement that once the coronavirus begins to subside, the market will bounce back once again.”


Thank you for reading this post, don't forget to subscribe!

This Post Has 2 Comments

  1. Satish Jaitha

    Brilliant, very informative and consice.
    Made it an interesting read.

  2. Aniket Kulkarni

    Have been wondering how the Spanish Flu & Covid-19 are related and this very well written article puts light on the same. Maybe a similar picture could play out in the future.

Leave a Reply